In January , however, the COVID pandemic hit the transportation sector, which accounts for more than 60 per cent of oil demand. The shutdown of industries in China in February and later in Europe and the US led to a fall in demand for metals, easing their prices. Prices of food items like palm oil, soy oil, sugar and corn also declined with retrenchment in demand for ethanol and bio-diesel as crude oil prices declined.
Prices of some food items like rice and wheat were, however, supported by stockpiling by consumers in regions affected by COVID Core consumer price inflation was low in advanced economies AEs , despite robust job growth. Many emerging market and developing economies EMDEs also experienced easing of inflation due to subdued economic activity, although some pressures from rising food prices were visible. With the outbreak of COVID and consequential lockdown bringing global economic activity to near standstill, many economies resorted to monetary and fiscal measures to ward off recessionary tendencies and provide support to growth.
An atypically prolonged south west monsoon SWM along with unseasonal rains during the kharif harvest period led to crop damages and supply disruptions which pushed up food prices, especially those of vegetables, from September to December Thereafter, with the fading of these pressures and encouraging prospects for the rabi crop, food inflation started easing from January Inflation excluding food and fuel remained generally moderate during the year, with a historic low in October , before gradually picking up again till January This upturn in expectations is also corroborated by more forward-looking assessments of professional forecasters and by surveys of consumer confidence.
During the first half of the year, food inflation trailed below headline inflation, whereas inflation excluding food and fuel ruled above it. The dynamics reversed during the second half, with food inflation remaining significantly above the headline and inflation excluding food and fuel pacing below it.
Inflation in fuel prices had eased below headline inflation from February to February , but rose above it in March Consequently, its contribution to overall inflation surged to The delay in the onset of the southwest monsoon SWM by around a week, followed by a considerably longer delay in withdrawal by 39 days , led to the persistence of high momentum in food prices.
Additionally, cyclonic storms and unseasonal rains resulted in supply disruptions and damage to kharif crops, primarily vegetables and pulses, during December-January Chart II. Price pressures soon became broad-based and were also observed across items such as cereals, milk, eggs, meat and fish, and spices. The delayed winter easing of vegetables prices brought some relief during January-March Excluding vegetables, food inflation would have averaged bps lower in 6.
The crop damage, mentioned earlier, resulted in a historically high build-up of momentum; consequently, vegetables price inflation rose to an all-time high of In addition, unseasonal rains during September-October damaged the kharif onion crop in major producing states of Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh, escalating prices from September Furthermore, the rains also impacted the transplantation of the late kharif onion crop.
Onion price inflation skyrocketed to With the arrival of the delayed kharif crop and on the back of a better rabi crop, which boosted the production of onions, as per the 2nd Advance Estimates AE of the Ministry of Agriculture, onion prices started easing from January Consequently, potato price inflation reached an all-time high of 63 per cent in January , after emerging out of 7 months of continuous deflation in November In the case of tomato prices, inflation peaked at 70 per cent in May and remained in high double digits till December , due to delayed harvesting in Maharashtra and fungus-damaged crops in Karnataka, coupled with the supply disruptions referred to earlier in key supplier states — Karnataka, Maharashtra and Himachal Pradesh.
Tomato prices, however, moderated during November - February , in line with the usual seasonal pattern. In the case of wheat, inflation averaged around 6. Non-PDS rice prices emerged out of 11 months of deflation in October on account of positive price pressures and unfavourable base effects to reach an inflation level of 4. This was followed by similar hikes by milk co-operatives in other states, elevating the momentum of milk and products prices during the year.
Increases in the cost of production because of reduced availability of fodder also contributed to an upward revision in procurement prices and, subsequently, in retail prices. Higher global prices for skimmed milk products also supported milk prices. Milk price inflation peaked during the year at 6. Ahead of this development, a substantial fall by 54 per cent in imports during had helped in rebalancing the demand-supply situation. Additionally, a decline in kharif pulses production by 4.
Meat and fish prices reflected higher feed prices, especially of maize and soybean. Along similar lines, egg prices witnessed heightened prices during September-January Prices of spices, especially of dry chillies and turmeric, registered significant pressures due to a reduction in the area under production. Fuel inflation eased sequentially from April to June and moved into deflation during July-November , pulled down by favourable base effects and muted price pressures in major fuel items Chart II.
Firewood and chips inflation picked up during December to February on the back of strong price pressures on winter demand. Administered kerosene prices continued to rise throughout as oil marketing companies OMCs raised prices in a calibrated manner to eventually phase out the kerosene subsidy.
Electricity inflation, which had largely remained in negative territory during April-August , also recorded an uptick in H Reflecting these developments and strong unfavourable base effects, fuel inflation turned positive in December and reached an intra-year peak of 6.
Some hardening occurred during November January due to prices of personal care and effects and transport and communication sub-groups, reflecting increase in gold prices, hikes in mobile telecom tariffs, and the rise in petrol and diesel prices Chart II. Subsequently, a sharp fall in transport and communication prices in February and March on the back of easing international crude oil prices and falling domestic air passenger traffic led to moderation during February-March Within the miscellaneous group, price pressures remained generally contained in respect of household goods and services, health, recreation and amusement, and education.
A historic low of 3. Net of housing, inflation excluding food and fuel averaged 3. International prices of cotton, a major input into clothing production, as measured by the Cotton A Index, fell during May to August , followed by a recovery during September January Within the food group, price spikes for different items occurred at different time points.
Empirical analysis for the period January and February suggests that seasonal behaviour has changed in the case of prices of many food items such as, onions, ginger, brinjals, cauliflowers, okras and green peas. Interestingly, despite being the most volatile item, seasonality in onion prices has declined significantly over the years, partly reflecting improvement in cold storage facilities.
Volatility estimated from asymmetric GARCH 12 models suggest volatility in onion prices is likely to persist in the near term, while tomato price volatility may be short-lived. Inflation is persistent in the case of protein items and dry fruits, more than that for prices of vegetables.
There is no evidence of persistence of volatility in prices of items such as petrol, diesel and precious metals, although these items also contribute to volatility in headline inflation. Inflation based on the consumer price index of agricultural labourers CPI-AL and the consumer price index of rural labourers CPI-RL , which do not have housing components, also increased during the year and reached It reached an intra-year low of zero per cent in October lowest in 40 months due to deflation in prices of non-food manufactured products and fuel and power.
It picked up during November January , however, driven by a sharp uptick in prices of primary articles and unfavourable base effects, before moderating to 0. On an annual average basis, WPI inflation softened to 1. A similar easing was also visible in the GDP deflator to 2. The extent of MSP increases varied across crops, ranging from 1.
MSPs of rice and wheat were increased by 3. In the corporate sector, pressures from staff costs remained moderate during the year. Global crude oil prices have started firming modestly in more recent weeks. Heightened volatility in financial markets could also have a bearing on inflation. All of these may influence inflation expectations of households, which are adaptive in nature, and show significant sensitivity to shocks to food and fuel prices.
Monetary policy, therefore, has to keep a constant vigil on price movements, especially as they can translate into generalised inflation. The rate of money supply M3 slackened as deposit growth moderated. Towards the close of the year, the slowing of deposit growth became accentuated as COVID impelled a flight to cash.
In terms of the sources of money supply, credit growth slumped to half its rate a year ago, reflecting weak demand and risk aversion among banks. These developments engendered abundant liquidity in the system which eased liquidity premia in the midst of strong discrimination by financial markets on credit risk concerns.
Sub-section 3 examines developments in money supply in terms of its components and sources, throwing light on the behaviour of assets and liabilities of the banking sector. The underpinnings of bank credit evolution during the year have been covered in sub-section 4.
This is followed by concluding observations and some policy perspectives. Among components, the expansion in RM was driven by currency in circulation CiC — per cent of the RM expansion during the year. The year began with the usual seasonal spurt in currency demand in Q1 associated with summer holidays, weddings, rabi procurement and kharif sowing. In the following quarter, CiC contracted due to seasonal slack of economic activity in cash-intensive sectors such as construction and agriculture.
Thereafter, CiC expanded, reflecting rise in currency demand for kharif harvest and festivals in Q3 and the harvest of rabi crops during Q4. The year ended with a surge in pandemic-related rush to cash. Overall, CiC growth of Consistent with the accommodative stance of monetary policy set out in June , the Reserve Bank ensured comfortable liquidity conditions, augmenting its liquidity management toolkit with unconventional instruments.
Among other constituents of NDA, net claims on banks 15 and the commercial sector mainly PDs , reflected mainly net LAF absorption aimed at sterilising forex operations and managing the large overhang of liquidity in the system Chart II. On a year-on-year basis, however, there was a moderation in time deposit growth due to the decline in interest rates and the general slowdown in economic activity Chart II. The flight towards cash and a concomitant drawdown on demand deposits was particularly visible in the last quarter of , in the wake of uncertainities related to COVID pandemic.
Nonetheless, bank credit to the commercial sector grew at a lower rate than a year ago, reflecting lower bank credit offtake in the economy Chart II. With non-SLR investments of banks also decelerating, commercial banks augmented their SLR portfolios, which was reflected in net bank credit to government increasing by Also, the money multiplier adjusted for reverse repo appears to be a better indicator, capturing the recent dynamics of economic activity more closely than the unadjusted money multiplier.
As at end-March , the reserve-deposit ratio was 3. The moderation in the credit-deposit ratio to It varied with the evolution of the economy — from the pre-nationalisation phase to the post-nationalisation phase, and subsequently, the reform phase starting from early s followed by movements dictated by upturns and downturns in growth cycles. The average credit-deposit ratio of 72 per cent during the first two post-independence decades fell to 69 per cent during the next two decades as deposit growth gained momentum with the geographic spread of banking services, and further to 55 per cent during due to phases of subdued credit demand.
Subsequently, the average credit-deposit ratio increased to 75 per cent during on the back of a credit boom , and supportive economic growth conditions Chart II. The unabated weakening of economic activity, coupled with deleveraging of corporate balance sheets and risk aversion by banks due to asset quality concerns, was accentuated towards the close of the year by the pandemic woes Chart II.
Several fiscal and monetary policy measures were also undertaken in India in sync with other countries to mitigate the macroeconomic impact caused by the pandemic Annex II. With a nation-wide lockdown and people mostly remaining indoors, amidst fear and uncertainty, the usage of cash witnessed an abnormal rise Chart II.
The Reserve Bank undertook expansionary monetary policy measures to ensure the availability of adequate liquidity in the system. Credit growth to agriculture and allied activities, and industry — mainly large and medium units — decelerated in However, credit growth to micro and small industries accelerated. Within industry, credit growth to beverage and tobacco, mining and quarrying, petroleum, coal products and nuclear fuels and rubber, plastic and their products accelerated whereas flows to chemicals and chemical products, cement and cement products and construction decelerated.
Credit growth to food processing, basic metal and metal products and infrastructure contracted Table II. Many economies, especially in the emerging world, where the virus has spread rapidly, experienced the phenomenon of rising cash in circulation. Cross-country monetary statistics IMF, indicate that the increase in currency in circulation was particularly sharp in Brazil, Chile, India, Russia and Turkey, as also in advanced economies such as the US, Spain, Italy, Germany and France, where the use of cash is less Chart 1.
The rise in currency in circulation in these countries occurred concomitantly with liquidity injecting measures undertaken by their central banks. Rising uncertainty reduces the willingness of businesses to invest money and generate employment opportunities whereas, on the other hand, it reduces consumer spending Ahir, et al. Concomitantly, the y-o-y growth in currency with the public CwP accelerated from By contrast, bank credit, which had decelerated continuously during the year, has remained largely stable through the COVID outbreak despite sharp contraction in activity levels.
Reflecting these developments, the credit-deposit C-D ratio increased from Post-March , the easing was primarily due to a sharp rise in deposits, driven by a heightened propensity to save in response to the uncertainty caused by COVID Chart 5. Ahir, H. Credit to the services sector decelerated sharply, primarily driven down by slowdown in credit growth to NBFCs, on account of concerns relating to the health of the sector.
There was also a sharp deceleration in credit to the trade segment. Personal loan growth decelerated moderately. Housing loans, which constitute the largest segment of personal loans, witnessed a moderate deceleration, along with credit cards outstanding. However, there was an acceleration in growth of vehicle loans during the year. Among bank groups, credit growth by public sector banks PSBs decelerated sharply to 3.
Credit growth by private sector banks also decelerated to Credit growth weakened during the year, with deceleration in all major sectors. The Reserve Bank pro-actively managed liquidity conditions through conventional and unconventional measures to augment system-level liquidity. Going forward, surplus liquidity conditions, coupled with policy rate reductions, are expected to instill confidence, easing financial conditions and incentivising the flow of funds at affordable rates so as to rekindle investment and lay the foundations of strong sustainable growth as the COVID curve flattens and the economy repairs and revives.
Volatility soared to extraordinarily high levels, reminiscent of the turbulence seen during the global financial crisis GFC. As investors scrambled into US dollar positions to seek safe haven, depreciations set in upon almost all other currencies. Bond yields firmed up on massive sell-offs, but speedy central bank actions with widespread policy rate cuts and large amounts of liquidity injection along with fiscal measures appeared to have calmed sentiment.
After the announcement of the corporate tax rate cut in September , it made handsome gains and rose to record new highs in January on the back of positive sentiments on US-China trade talks and the likelihood of an orderly Brexit. However, this positive momentum was interrupted by the escalation of geo-political tensions between the US and Iran, weakening domestic growth prospects and higher inflation expectations. After exhibiting range-bound two-way movements with weakening bias during first three quarters, Indian rupee depreciated to an all-time low during Q on large capital outflows from both the equity and debt markets.
In the money market, as detailed in sub-section 2, overnight money market rates call money, triparty repo, and market repo were largely aligned with the policy rates albeit with a downward bias, and were insulated from adverse global developments by proactive liquidity management by the Reserve Bank. Bond yields softened significantly during as discussed in sub-section 3, aided initially during H by positive sentiments from the general election results, policy rate cuts, infusion of liquidity by the Reserve Bank and the possibility of the fiscal deficit slippage being contained.
During H, yields softened further on the back of auction of special OMOs, softening of US treasury yields, easing crude oil prices and announcement of comprehensive liquidity measures on March 27, to mitigate the adverse impact of COVID Sub-section 4 profiles developments in the corporate bond market wherein yields softened during , reflecting policy rate cuts by the MPC and injection of systemic liquidity, especially through the special OMOs and Long-term Repo Operations LTRO conducted during the latter part of the year.
Sub-section 5 presents developments in the domestic equity market, followed by a discussion on movements in the Indian rupee in the foreign exchange market in sub-section 6. The section concludes with some forward-looking perspectives. In the second half of the year, bouts of volatility, mainly in March on account of the spread of COVID, dispelled the calm. The Reserve Bank proactively managed frictional liquidity conditions with a slew of conventional liquidity measures, viz.
The average absolute spread of the WACR over the policy rate increased to 11 basis points bps in from 9 bps in , as surplus liquidity conditions prevailed in the banking system for most of the year. The triparty repo and market repo rates remained below the WACR, on average, by 22 bps each. Volumes in the triparty repo and market repo segments increased by 24 per cent and 9 per cent, respectively.
The share of triparty repo and market repo segments were 68 per cent and 25 per cent, respectively, of the total money market volume during as compared with 64 per cent and 27 per cent, respectively, in The traded volumes in both secured and unsecured money market segments increased in recent months, in spite of COVID The weighted average discount rates in the primary CP market hardened from September until mid-October on increased risk perceptions resulting from defaults and rating downgrades of a few NBFCs.
However, it softened by 10 bps to 5. In the rest of Q, the benchmark G-sec yield softened by 47 bps, taking positive cues from the general election results, infusion of liquidity by the Reserve Bank and lower crude oil prices. The yield on the year benchmark security softened from 7.
Notwithstanding a larger than expected policy rate cut of 35 bps by the Reserve Bank, rollback of surcharge on foreign portfolio investments FPIs and higher than expected surplus transfer by the Reserve Bank, market participants remained wary in August and September with the yield hardening by 19 and 14 bps, respectively, on concerns over fiscal slippage and geo-political tensions following the attack on Saudi oil refineries. Initially, the yield on the new year benchmark 6.
Yields continued to trade with a downward bias on account of fall in global bond yields due to risk aversion in the aftermath of the COVID outbreak and lower crude prices. However, yields hardened during the latter part of Q due to sustained FPI selling amidst flight to safety. Subsequently, G-sec yields resumed easing, following a slew of policy measures announced by the Reserve Bank to alleviate COVID induced financial stress. The yield on benchmark year G-sec closed at 6. Following Swanson, et al.
One-day change in G-sec yields between the announcement day and the next trading day is calculated because the press releases of these announcements were posted on the Reserve Bank website after the close of financial markets. Statistical significance is measured relative to the unconditional standard deviation of the corresponding rate changes over similarly sized windows over a period of one year preceding the month of these announcements Table 1.
The dynamic impact of OT on the year G-Sec yield is obtained by applying a Local Linear Projection LLP model which forecasts the path of the yield in response to the December 5, monetary policy announcement. The forecasted path is then compared with the observed path of the yield Chart 1. The result suggests that the year G-sec yield would have been higher without the two OT announcements in December Lloyd, S.
Swanson, E. Das, S. It was announced in the Union Budget that certain specified categories of G-sec would be open fully for non-resident investors apart from being available to domestic investors. Accordingly, in consultation with the government, a separate route, viz. Five G-secs were specified as eligible for investment under the FAR, from the date on which the scheme comes into effect.
The yield on 5-year AAA-rated corporate bonds softened during , reflecting reduction in the policy repo rate, surplus systemic liquidity conditions, and the impact of special OMOs and LTRO auctions conducted during the latter part of the year. However, yields registered some uptick in March with the unfolding of distress in a major private bank and COVID During the period March , , turbulence in global financial markets and worsening of financial conditions resulted in a hardening of 5-year AAA-rated corporate bond yield by 72 bps.
This was addressed by the announcement of various liquidity measures by the Reserve Bank on the back of a sizeable reduction in the policy rate. Overall, the 5-year AAA-rated corporate bond yield eased by bps to 7.
Private placements remained the preferred choice for corporates, accounting for Outstanding corporate bonds increased by 6. Consequently, utilisation of the approved limit by FPIs declined to Volatility soared to unusually high levels. However, prospects of a stable government and expectations of further monetary easing by the Reserve Bank buoyed market sentiment driving the BSE Sensex to 40, levels in June However, this rally proved transient as bearish sentiment gripped markets after a default by a housing finance company fuelled liquidity concerns in the NBFC sector in June Markets remained under pressure on negative cues from global equity markets, reporting of a borrowing fraud in a public sector bank, concerns over lacklustre corporate earnings results for Q, slow progress of monsoon and continued FPI outflows due to the proposed increase in tax surcharge for FPIs registered as non-corporates.
The BSE Sensex declined marginally in August , unsettled by adverse domestic developments such as tepid corporate earnings results for Q, lukewarm industrial activity and auto sales, and negative global cues, viz. However, the rollback of the super-rich tax on FPIs, front-loading of capitalisation of public sector banks and deferment of a hike in registration fees for automobiles provided some support to market sentiment.
The bullish momentum gathered strength on growth boosting measures by the GoI, support to the Insolvency and Bankruptcy Code IBC amendment and approval for a partial credit guarantee scheme for public sector banks to purchase pooled assets from NBFCs. The decline intensified on February 1, with the Sensex plunging by points 2. However, markets made a V-shaped recovery on February 4, on the back of a sharp fall in crude oil prices and release of robust manufacturing PMI data for January Subsequently, the announcement of credit and liquidity enhancing measures on February 6, also supported market.
This recovery, however, proved short-lived. The BSE Sensex fell by 2, points 8. The market lost further ground with the BSE Sensex falling over 10 per cent during early hours of trading, attracting circuit breakers and suspension of trading for 45 minutes. A statement from SEBI indicating that the fall in the Indian stock indices has been significantly lower than in many other countries and assuring market participants of suitable and appropriate actions, if required, helped calm market nerves with the BSE Sensex ending on March 13, with a net gain of 1, points 4.
However, these gains could not be sustained as bearish sentiment returned on the back of continued moderation in global crude prices and growing worries over the impending recession. The Indian equity market breached the lower circuit bound for the second time in a month, with the BSE Sensex recording its biggest fall of 3, points Markets regained some lost ground thereafter amidst expectations of fiscal measures by the government, announcement of comprehensive monetary, liquidity and regulatory measures by the Reserve Bank including a sizeable reduction in policy rates on March 27, Overall, the BSE Sensex registered a decline of This sell-off in the equity market was accompanied by a surge in VIX from However, it is observed that over the last few years, domestic institutional investors DIIs are increasingly emerging as a counter balancing force to FPIs during stress situation.
Further, the correlation between monthly net investments of MFs and FPIs during came out as high as Hence, market capitalisation at end-March stood at To comprehend the overall financial conditions, a Financial Conditions Index FCI was constructed using Principal Component Analysis on twelve indicators across different market segments. The significant tightening of financial conditions as manifested in sharp correction in equity markets, widening of credit spreads and depreciation of the Indian rupee, is suggested by the FCI as well.
Financial conditions eased subsequently in response to various liquidity measures undertaken by the Reserve Bank Chart II. Box: II. The outbreak of COVID impacted global financial markets and brought an abrupt tightening of financial conditions. Nifty 50 slumped by The sectors that have been hit hardest include hotels, media, construction, power, auto, metals and banks, whereas telecom, pharmaceuticals, personal care, tea and coffee, petroleum, gas and IT have outperformed the overall market Chart 2.
Financial conditions tightened across fixed income markets due to panic sell-offs by FPIs from EMEs, coupled with liquidation of positions by MFs to meet redemption pressures from investors, particularly those invested in funds with higher credit risk. This was reflected in widening of spread of G-sec and corporate bond yields over the policy repo rate Chart 3. However, spread of 3-year and 5-year G-sec and corporate bond yields narrowed subsequently over the policy repo rate.
Credit default swaps CDS premium of Indian banks dropped sharply from six-year highs on expectations that recent policy support would help lenders to avoid worse damage from the pandemic Chart 4. As bearish sentiment gripped markets, EMEs witnessed sharp reversal of capital flows with their currencies experiencing significant depreciations.
India experienced one of the highest outflows amongst emerging market peers, but its currency performed relatively better Chart 5 , with the depreciation of the rupee being lower than at the time of the GFC and taper tantrum despite large outflows Chart 6.
Assets under management of equity-oriented mutual funds declined by While the depreciation of rupee was modest during H — it depreciated by 2. Thereafter, the rupee recovered some lost ground, tracking gains in the equity market following the announcement of corporate tax cuts.
The rupee continued to extend the gains heading into H on positive sentiment around growth boosting measures by the government and the trade truce between the US and China. Although the Indian rupee depreciated by 8. Chart II. However, the near-term premia edged higher in the February-March period as rupee demand increased ahead of end-year closure of accounts. Measures taken by the government and the central bank in addressing the macroeconomic and financial fallout of COVID would also play an important role in shaping the behaviour of financial markets.
For the central government, the overshoot of 1. In the case of states, the consolidated GFD deviated from the budgeted level, again mainly on account of lower revenue collections Sub-sections 4 and 5 outline the developments in state government finances during and , respectively. General government finances are discussed in sub-section 6.
The final section sets out concluding remarks and some policy perspectives. On a year-on-year y-o-y basis, direct taxes declined by 7. Although the shortfall in tax revenues was partially compensated by an increase in non-tax revenues, primarily due to transfer of excess reserves from the Reserve Bank 21 and partial settlement of pending adjusted gross revenue AGR dues by telecom companies, they fell short of the RE.
While capital expenditure was close to the budget target, revenue expenditure was curtailed to The freeze in dearness allowance, as announced by the Union Government, and the compression under other heads of revenue expenditure will likely be offset by the increased expenditure requirement to fight COVID, including the increased interest expenditure due to higher volume of borrowings.
Expenditure on major subsidies, viz. Capital expenditure, on the other hand, is budgeted to grow at The capital expenditure target for communications, however, has been budgeted five times higher in the Union Budget than in RE , again a challenging task. An important goal of the Budget is reforms in the areas of labour, investment, coal and mining, which could revive economic activity and impart buoyancy to revenues.
This deviation was mainly caused by the economic slowdown leading to lower revenue — both own and central transfers. Under revenue expenditure, allocation to development expenditure was increased, while non-development expenditure was reduced. The reduction in capital expenditure was largely reflected in reduced spending towards rural development 22 , The increase in revenue is expected from higher own tax revenue and devolution of tax. The reduction in expenditure is likely to be more under spending on education, social security and welfare, relief on account of natural calamities, other agricultural programmes and energy.
While higher capital spending is budgeted in education, medical and public health, rural and urban development, spending on energy and transport is expected to be curtailed. Outstanding liabilities also increased to In , fiscal deficit and outstanding liabilities are budgeted at 5. However, based on provisional accounts information, the general government fiscal deficit including all states is expected to deteriorate further to about 7.
Thus, the fiscal gains achieved in the previous two years were reversed in A caveat is that most of the estimates for were worked out before the nation-wide lockdown. Given the shortfall in revenues — a direct fallout of subdued economic activity and increased expenditure requirement to fight the pandemic — the general government fiscal deficit and debt are likely to be materially higher than budgeted. At the same time, a significant curtailment in expenditure was justifiably avoided in view of the economic slowdown, which got accentuated from the second half of Meeting the fiscal targets budgeted in has become even more challenging due to COVID, in view of containment measures and fiscal interventions for providing health infrastructure, helping vulnerable sections of the society and sector-specific relief measures.
In this scenario, it is desirable to have a clear exit strategy with credible consolidation milestones and timelines in reworking the path towards fiscal rectitude in the coming years. In the event, reserve buffers were strengthened, despite portfolio outflows towards the close of the year on widespread risk aversion triggered by the spread of COVID Sub-section 4 delves into the behaviour of invisibles. Together, sub-sections 3 and 4 unravel the movements in the current account balance during the year.
Sub-section 5 dwells on net capital flows and movements in reserves. External vulnerability indicators are evaluated in sub-section 6, followed by concluding observations. International organisations such as the IMF and the World Bank projected a recovery in global growth and trade for and The sudden outbreak of COVID and swift contagion forcing the ensuing lockdown shattered this optimism.
The loss of output, employment and life itself across countries brought the global economy to standstill. This triggered a wave of downward revisions to global output growth, with the IMF projecting a contraction of world GDP by 4. The contraction in advanced economies AEs is projected to be more severe at 8. In fact, the OECD projected a sharper contraction of 7. The impact on trade is expected to occur through various channels, including supply-chain disruptions, adoption of restrictive trade policies, volatility in international commodity prices, after-effects of lockdowns and lower demand resulting from the projected global recession.
Prices of commodities dropped precipitously, creating pressure on commodity-exporting countries. On the other hand, gold prices increased, reflecting safe-haven demand by investors amidst heightened global uncertainty. Inflationary pressures faced by EMDEs eased due to weaker demand and the sharp decline in oil prices. Global financial markets were buffeted by bouts of volatility amid investor concerns about downside risks to global growth accentuating towards the end of Currencies have fallen in the range of per cent in Q — faster than in the early months of global financial crisis GFC.
Several countries provided liquidity backstops to enable domestic banks to offer broad loan forbearance to borrowers. As per the WTO, global merchandise trade growth dropped to 0. The deterioration in exports performance was broad-based — commodity groups constituting more than four-fifths of the export basket recorded lower values of shipments.
However, my view is that the past three governments used assets sale to make up for the shortfall in income. However, I am yet to see evidence of such a perspective being operationalised; disinvestments are still driven largely by fiscal pressure. Questions were indeed raised when less than a month after the RBI announced transferring Rs 1. This was jarring in view of the fact that industrial production and capacity utilisation have been falling because of lack of demand in the economy, ruling out possibility of corporate invests in the short run.
The RBI money could surely have been put to better use - to drive demand - given the fact that the GDP growth rate had taken a big hit - falling steadily from 8. Settings Logout. Budget Strategic disinvestment, a questionable source of off-budget financing. This is worrisome as it threatens to jeopardise financial health of many CPSEs, including the 'navaratnas' for short-term fiscal gains.
Strategic disinvestment seems to be hurting CPSEs for short-term gains. Tweet Youtube. Tags: Off-Budget Financing strategic disinvestment. Previous Story 'Monetary policy has limits; reforms, fiscal steps required'. Next Story Scope of personal tax cut grows slim as govt stares at tax shortfall of Rs 2 lakh crore.
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Please give an overall site rating:. The developments come as the Life Insurance Corporation of India had closed 23 schemes on January 31 following the guidelines of the Insurance Regulatory and Development Authority of India. The govt has pegged disinvestment for FY21 at Rs 2. The government had set a target of Rs 1. Apart from Air India, other major strategic sales lined up are that of government refiner, Shipping Corporation and Container Corporation.
Monday, November 23, Latest News. News Reports. Read how OpIndia Staff - 23 November, The environmental cess is collected from the trucks that enter Delhi every day, and as a part of every litre of diesel sold in the NCR. The Communists who once ruled Bengal with an iron hand would laugh at his Kerala's new draconian law. Kim Jong Un would be so unimpressed. Throwback to the time Congress-led UPA brought in the draconian section 66A of the IT Act that could put one in jail for 3 years over 'offensive' social media posts.
Ashok Gehlot claimed that Love Jihad was 'manufactured' by the BJP to 'divide the nation' and 'disturb communal harmony'. Non-Muslim women are being groomed to accept their own subjugation at the hands of Muslim men - It is time to call it what it is - Grooming Jihad, not Love Jihad. Social Media Fact-Check.
After several netizens pointed out the error, Gunasekar posted another tweet with correct information that Baig was never with BJP. Editor's picks. Uttar Pradesh: One Alam kills minor daughter on the advice of an occultist, Times Now tries to give a Hindu spin by calling the OpIndia Staff - 6 November, Since the perpetrator is a Muslim, it was evident that the occultist would also belong to the same community, but Times Now calls him tantrik.
OpIndia Explains. Anvay Naik suicide case for which Arnab Goswami was arrested: Letters exchanged, the closure report, and unanswered questions Nupur J Sharma - 23 November, On 4th of Nov, the country watched as Arnab Goswami was dragged out of his house by over 20 armed policemen for a closed suicide case. Washington Post editor, who ranted against white women, lies about France targeting Muslim children: Here are the details OpIndia Staff - 23 November, Global Opinions Editor at the Washington Post, Karen Attiah, is at the receiving end of great criticism after she spread fake news.
Read details Shashank Bharadwaj - 22 November, All Books Culture and History Satire. Bharti Singh resisted initially but offered full cooperation once she realised NCB officials were treating her far better than Kapil Sharma ever did: OpIndia K Bhattacharjee - 21 November, OpIndia Staff - 18 November, Barack Obama writes in his memoir that Pakistan was not informed about the Abbottabad mission as its military had links with terror groups.
How do you manage to becomes intolerable, crosses tolerable threshold. Forex broker germany Items: Sex Ratio at. Monthly Earnings: Cotton Textile Mills. Nationalised Banks: Number of Employees. You are absolutely right that it is about distribution. On a surprise visit to all about continuance of caste consumption - production - employment. Number of Schools: Upper Primary. Sustaining journalism of this quality see data, information and analysis waiter in a eatery. INR mn 21, INR mn Gulati in Indian Express are good examples of writing that combines facts with a style that is more if an Opinion piece - what you call analytical notes Keep live. Census: Population: by Age Group.The time period is not suitable for determining the value of assets due to market fluctuations, hence, India will hold its divestment plans, reported. Out of total disinvestment proceeds of Rs 88, crore, five CPSEs - HPCL, NTPC, General Insurance, New India Assurance Company Ltd and. India's new unemployment allowance plan for lockdown-induced job loss India must be the only big economy (fifth largest in the world at nominal Govt eyes LIC listing by March as disinvestment target falls short.